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Author: | Avdi, O. G. Orbay, B. Z. |
Title: | Exchange Rates, Relative Domestic Prices, and Disinflation Program in Turkey |
Journal: | Russian and East European Finance and Trade
2001 : JUL-AUG, VOL. 37:4, p. 39-49 |
Index terms: | EXCHANGE RATES PRICES TURKEY ECONOMIC CONDITIONS |
Language: | eng |
Abstract: | The authors study the Turkish economy. In order to analyze the effects of exchange-rate fluctuation on relative domestic prices, the authors set up a simple theoretical model consisting of two countries (one domestic and one foreign country). The authors assume that production in the domestic country has a certain imported input component. It is also assumed that firms in the domestic country operate with a less efficient technology than foreign counterparts. In the authors' differentiated product model, domestic and foreign firms determine their production levels simultaneously a la Coumot. The results show that with sufficiently small imported input dependency, depreciation of domestic currency leads to a decline in the ratio of domestic goods prices to the price of imported brands. |
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